Legisletter – May 19, 2015

The Legislature adjourned its scheduled 105-day regular session two days early last month without a budget deal, and lawmakers are now near the end of a 30-day special session set to end May 28. If they can’t reach a deal by then, Gov. Jay Inslee will call them back for another 30-day session.

The only major achievement of the special session was yesterday’s revenue forecast that shows the state will have an additional $309 million in revenue for the next two-year state budget. The state will now have $3.3 billion more available for the 2015-2017 budget than it had for the current two-year budget.

The two key legislative budget writers serve on the state Economic and Revenue Forecast Council that issued the latest revenue numbers yesterday.

Senate Ways & Means Chair Andy Hill (R-Redmond) stated:

“At some point you have to say, holy cow we have a lot of money. We should be able to get this job done very quickly. We are well, well beyond what you would think you would need to get out of town.

House Appropriations Chair Ross Hunter took a more low-key approach:

“Yes, this will make it easier to come to conclusion. Does it solve all of our problems? No.”

The budget stalemate is largely based on the philosophical differences between the House and Senate on how best to proceed, with Gov. Inslee and the majority party in the House pushing for new tax revenue and the Senate Majority Caucus Coalition arguing new taxes are not needed to balance the new two-year budget.

Before session began, the House budget writers and Gov. Inslee argued a $1.5 billion tax increase was needed in addition to the new $3 billion in new revenue to fund their proposed budgets.

The Senate budget writers have taken a different approach. They have staked out a position that the state’s budget obligations can be met within existing revenue.

Two options lead the way in the House for raising taxes, although neither has been brought up for a vote on the House floor:

Capital Gains – HB 1484 is the latest proposal to create a capital gains tax in Washington. This version creates a 5 percent tax rate on long-term capital assets. The authors of the new tax did exempt the sale of principal residences, livestock related to farming and ranching, timber, and the sale of ag lands – if the landowner had owned the land for at least 10 years. Washington Farm Bureau testified in opposition to the creation of capital gains tax arguing it was nothing more than a limited-scope income tax. The bill has not yet been brought up for a vote in the House Finance Committee.

ACTION ITEM: Let your legislators know you oppose HB 1484 and any other legislation that creates a capital gains tax. Ask them to pass the budget within existing revenues and go home.

Cap & Trade – 2SHB 1314. The most recent version of Gov. Inslee’s cap-and-trade carbon tax proposal was heard late last week in the House Appropriations Committee. Washington Farm Bureau opposed the measure. Proponents tried to market the measure as a “rural jobs” bill, but a strong coalition of Washington workers, employers, farmers and foresters remained firmly opposed to the bill as a tax on energy that will pass new carbon costs to farm and forest operations. Inslee’s proposal would also give broad rulemaking authority to the Department of Ecology and create a bureaucratic climate ripe for market manipulation, speculation and fraud.

The proposal picks winners and losers through a bewildering complexity of rebates, phase-in periods, and phase-out periods. However, the bait of rebates declines and then disappears entirely just a few years into the future. Terry Willis, farmer and president of the Grays Harbor/Pacific County Farm Bureau, opposed the measure noting that the carbon “emitters identified are the very businesses that agriculture and processors do business with – fuel, manufacturing, gas and electricity. They will pass that expense on” and “farmers and businesses that support farming will see our profit margins shrink and our ability to invest in equipment that lessens our carbon footprint will also shrink.” Willis also noted that “our emissions are lower today than they were in 1990. If the governor wants to drive down emissions even more, we stand ready to develop collaborative policies everybody can support.”

Sen. Jim Hargrove, D-Hoquiam, has introduced a similar measure in the Senate, SB 6121.

ACTION ITEM: Tell your legislators you oppose the carbon taxes in the cap-and-tax bills (HB 1314 and SB 6121). Ask them to pass the budget within existing revenues and go home.